STA will widen lending, secure credit -CRIB Chairman

The Secured Transaction Act (STA) will be gazetted shortly widening lending and ensuring safety of credit, said Chairman, Credit Information Bureau of Sri Lanka (CRIB), Priyantha Fernando unveiling Sri Lanka's Secured Transaction Registry (STR) at a ceremony in Colombo on Tuesday.

He said the STA will support the implementation of STR which will boost credit growth and enhance economic activities in the country.

Private sector lending will increase resulting in more development in the country.

"Access to information is vital to mitigate credit risk. Lenders could obtain information about borrowers through STR and make quick informed decisions to avert risk," Fernando said.

A large number of SME sector borrowers are unable to obtain credit due to collateral.

The STR will help increase access to credit with movable assets as security.

Private sector lending has been low due to collateral.

Banks and financial institutions have to reduce the number of non performing loans as specified by the Central Bank.

STR also known as Movable Assets Registry is a central repository which houses specific information related to a security agreement. The STR will be monitored by CRIB.

Fernando said the Registry is a boon for small and medium scale industrialists to obtain credit with movable assets from lending institutions.

Fernando said that the electronic data system will help lenders to access information whether a movable asset has been mortgaged or not. The STR will help reduce defaults.

The STR could be accessed through banks, registered financial institutions and leasing companies. Equipment, machinery and account receivables can be used as securities for loans.

STRs are implemented in many countries as an effective credit risk management mechanism that enables wider access to credit by mortgaging movable assets.

The banking sector loan default rate during the first quarter this year has dropped compared to the corresponding period last year according to the Central Bank.

Fernando said that Sri Lanka is ranked 16th in the world for payments and settlements systems. Lending institutions which operate a sound IT system could easily take on board the STR.

The Credit Bureau plays an important role in credit risk management and promotion of a good credit culture in the country.

CRIB operates an on-line service and a help desk for people to obtain information and advice.

CRIB provides information on credit application and payment records of borrowers to licensed lending institutions to help them make lending decisions faster and protect against default.

LF